Asked by Nancy Lainez on Jul 27, 2024
Verified
If management decides to buy part Z43 from the outside supplier rather than to continue making the part, what would be the annual financial advantage (disadvantage) ?
A) ($34,500)
B) ($30,500)
C) ($15,500)
D) ($38,500)
Annual Financial Advantage
Annual Financial Advantage refers to the financial benefit realized on an annual basis from a particular investment or decision.
Outside Supplier
An external entity that provides goods or services to another company, not affiliated internally.
Making Part
The process or activities involved in the manufacturing or creation of parts or components that are then assembled into final products.
- Understand thoroughly the concept of make-or-buy decisions and how they affect financial outcomes.
- Pinpoint essential financial factors in evaluating whether to make or buy and in making decisions about special orders.
Verified Answer
Total cost would increase by $15,500 per year.
Learning Objectives
- Understand thoroughly the concept of make-or-buy decisions and how they affect financial outcomes.
- Pinpoint essential financial factors in evaluating whether to make or buy and in making decisions about special orders.
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